Offshore

Guest Opinion: Ethics And Compliance In Tax Planning

Anthony Markham and Dalila Ver Elst, Maitland , 7 August 2013

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The tax planner’s response

Tax planners regard the right to freedom of establishment as part of the free international market. In an effort to encourage growth, countries grant tax incentives which permit accelerated deductions in respect of capital projects against current income, in the interests of all. There is a strong case that tax and regulatory competition, like other forms of competition, restrains governments from excess and creates a stronger international society, not a weaker one.

As a vigorous proponent of the rule of law the tax planner believes that every citizen is entitled to know his legal position and is morally and legally obliged to obey the law. Freedom of the individual extends to the freedom of the collective entities which they establish.  This includes the freedom of movement of capital and of establishment in different environments.  The freedom to move away from a country which imposes excessive taxes or which is administratively inefficient or corrupt is an important freedom which will lead to efficient states which provide maximum benefit at minimum cost for the citizen.

Specialists in tax planning must understand the world’s tax systems, and as responsible advisors they are under a duty to help clients to comply efficiently.  Such actions are legal, support individual freedom, preserve wealth and assist in its application for those who should benefit. 

Responsible citizens support the rule of law to impose order on society, nationally and internationally.  Balance is achieved through legislative action or international agreement.  It is the duty of the tax planner to observe the rules that are imposed and to guide others to prosperity, taking advantage of the freedoms open to them.  People do complicated things, the rules are complicated, and it is this complexity upon which the profession is based.

The right to privacy is not a right to commit crimes behind a veil of secrecy.  The survival of tax planning as a profession is that - regardless of jurisdiction - structures and transactions should exist for economic reasons other than the avoidance of taxes.

International regulation of the financial industry to prevent instability of financial systems or abusive behaviour to clients throughout the world is to be promoted and supported.  But over-regulation, over-insistence on compliance and unnecessary box-ticking, is to be decried.  Over-compliance is not a force which reduces crime, or increases financial stability or protects consumers of financial services worldwide; it is instead grit in the system which imposes a substantial effective drag on the economy.

It is not the tax planner’s place to impose his personal moral code upon his clients, yet it can be appropriate to draw moral issues to the attention of clients.   This is partly because as a result of the infringement of the moral code, the planner and client could incur reputational and financial costs.  It is also so that the client can himself make informed judgements taking into account of the moral as well as the legal dimension.

Whether the individual practitioner believes that ethical concerns should play a role in tax planning or not, there are basic "ethical" principles that any good tax planner should adhere to, whether for reasons of ethics or simply prudence. The following three rules of responsible tax planning can act as a guide.

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